This week in LWIB, an update on Madoff and the Mets and is the annual bleating in the media over postseason start/finish times justified?
MADOFF AND THE METS UPDATE
It will soon be a year since the SEC charged Bernie Madoff with operating a Ponzi scheme. Subsequent to the charges it was soon revealed that New York Mets owner Fred Wilpon had been a Madoff investor for forty years. Determining the extent of the losses suffered by Mr. Wilpon either personally or via his investment company “Sterling Equities” and how (or if) this will impact the Mets has since been a sport unto itself. Erin Arvedlund reported in her book, Too Good to be True: The Rise and Fall of Bernie Madoff, that a sale of the Mets was a matter of when, not if.
The Wilpons have repeatedly and steadfastly denied that their investments with Mr. Madoff will affect the Mets. However, that has not quelled the speculation. Some wonder if there was a connection between the Mets aggressive behaviour (signing K Rod) in the early part of last season’s free agent market and their subsequent inactivity following the fall of Mr. Madoff. (The Mets did have the second highest payroll in MLB last season). Also curious to some were the relatively small amount of money the Mets spent in the 2009 amateur draft (although they are not traditionally big spenders in the draft) and the cancellation of their fall instructional league program. (The Mets counter that instead they opted to send prospects to a better program at their instructional facility in the Dominican Republic)
Select Read More to see the rest of the Madoff and Mets update, as well as whether postseason games end too late
LWIB, some in the media interpreted a recent filing to the bankruptcy court as evidence that the Wilpons’ rumoured losses (typically pegged at approximately $700 million) have been exaggerated. ESPN (in association with Reuters) reported;
The owners of the New York Mets baseball team made about $48 million in dealings with swindler Bernard Madoff, court documents showed.
The Mets Limited Partnership, which is connected to the Wilpon family, led by Mets owner Fred Wilpon, deposited $522.8 million in two accounts with Madoff and withdrew $570.6 million, according to a Monday filing by court-appointed trustee Irving Picard.
The New York Times reported;
The Mets and their owners, the Wilpon family, may be in better financial shape than has been assumed. That is one conclusion being drawn from a filing released Friday by the United States Bankruptcy Court in Manhattan, which is sorting through accounts in Bernard Madoff’s company.
The Wall Street Journal reported;
The New York Mets just emerged from a woeful season but the team's financial picture may not be as dire as previously believed.
A partnership connected to the baseball team -- which had widely been rumored to have lost money investing with Bernard Madoff -- actually gained a net $48 million from its dealings with the convicted swindler, according to a bankruptcy-court filing.
LWIB, there were some who read these same reports but reacted with more caution and scepticism concerning the financial fortunes of the Wilpon family and the Mets. Darren Rovell reacted at CNBC;
The headline in the Wall Street Journal this morning was certainly baffling: “Mets Win One: Owners Made Money Off Madoff.”
Mr. Rovell pointed out that it was the Mets Limited Partnership that “made money” according to the filing, which still leaves many questions unanswered.
All this is really a moot point if the Mets primary owners Fred Wilpon and Saul Katz did lose a significant amount of money from Madoff. The Mets have said that any money invested in Madoff will not affect the operations of the team. However, it’s hard to ignore the fact that Wilpon’s name appears 22 times on Madoff’s client list and that former Mets general manager Steve Phillips, who worked in the team’s front office from 1990 to 2003, said he “heard Bernie Madoff’s name once a week every week for 13 years.”
Shawn Hoffman reacted at his Squawking Baseball blog;
First off, ignore all the the articles you’re reading today saying that Fred Wilpon actually made money from their relationship with Bernie Madoff. Technically, he did — records show that the family deposited a total of $523 million, and withdrew $571. So leaving it at that, they actually turned a $48 million profit.
Mr. Hoffman goes on to estimate that, in the end, the Wilpons’ losses with Mr. Madoff will amount to several hundred million dollars. In summary, he writes;
Whatever the number, it’s a devastating loss, and it’s a pretty good bet that the Mets now account for a significant majority of Wilpon’s net worth. And the fact that he made a paper profit off of it may end up costing him even more money, since part of those “earnings” will likely be clawed back and spread around to the other victims. Whether he’ll eventually have to sell part of the team is anybody’s guess. But it definitely wouldn’t shock me.
At the IIATMS blog, Will Moller found precedent in how bankruptcy courts have treated “investors who withdrew their money previous to the fraud's exposure”. Mr. Moller has not been convinced that Mr. Madoff’s Ponzi scheme will not force a sale of the Mets.
In previous ponzi schemes, trustees have gone after investors who withdrew their money previous to the fraud's exposure, in an effort to even out the losses amongst all investors. The most well known example of this was fake-suicide-artist Sam Israel's Bayou Management. In that case, the court trustee took back all monies withdrawn from the fund going back two years, combined that amount with money made through liquidation of the fund's actual assets, and then paid all investors back proportionally.
This article on portfolio.com writes that "New York law only permits pursuing the return of assets -- principal as well as profit -- over the six years prior to the investment firm's bankruptcy in December." This entire phenomen is referred to as claw back, and I'm uncertain as to how long the lookback will be (though it'll be somewhere between the Bayou-suggested 2 years, and the maximum of 6). However, it's very likely that Sterling will end up trading the $570.6 million that they withdrew from Madoff for some appreciably smaller number. Given the size of the Madoff scheme (and the length of time it went on for) that number will probably be significantly lower than the 33% returned in the Bayou case.
For Mets' fans hoping to see big name (and big money) acquisitions this offseason, to help make baseball's second most expensive team competitive again, don't hold your breath. For those of you hoping the Wilpons' will have to sell (paving the way for someone not named Omar Minaya to take the reins), well, it may be a good year.
Shawn Hoffman noted that, “it’s a pretty good bet that the Mets now account for a significant majority of Wilpon’s net worth.” Regardless of who owns the team in the near future, the Mets are well positioned with a new ballpark and a controlling interest in a very lucrative RSN. From the aforementioned WSJ report;
In addition to the Mets and real-estate assets held through Sterling Equities, the Wilpon family owns more than 80% of Sportsnet New York, a regional sports network co-owned by Comcast and Time Warner. The network is one of the family's most reliable producers of cash, with fee agreements with cable operators producing roughly $15 million a month.
Advertising on the channel produces millions more. According to people with knowledge of the SNY partnership, the media companies hold a right of first refusal if the Mets choose to sell their interest in the regional sports network.
Officials with Major League Baseball said the Mets remain a healthy franchise with a new stadium, Citi Field, and local media rights fees from SNY worth more than $50 million a year.
So much remains unresolved. How long will it take to untangle the losses of Sterling Equities, the Mets and the Wilpons from the maze of a decades long $65 billion fraud scheme? More immediately, will the Mets cut payroll this off-season and will we know the motives behind it? Will the Wilpons be forced to sell the club in the end? It is likely that nobody, perhaps not even the Mets owners, actually knows.
DO POSTSEASON GAMES END TOO LATE?
A large number of closely contested and exciting games, played by teams in large markets, has resulted in a 15% increase in TV ratings for the MLB postseason over last year. Yet, as is the case every postseason, many sportswriters, columnists, talking heads and bloggers have wondered why MLB and their TV partners cannot understand that scores of fans on the east coast are falling asleep before the games end. Bruce Dowbiggin, based in Toronto, wrote about the too lengthy contests (no argument on that point) and in particular the Game 2 ALCS 13 inning classic.
We understand why the players draw out the drama. They have nowhere else to go. They are paid. But many of the people in the Fox audience east of the Mississippi were counting Serta sheep by the time the game mercifully concluded.
Mr. Dowbiggin is far from alone in his assumption that most east coast fans did not see the final innings of the Game 2 Yankees / Angels series but the ratings reveal the opposite. Michael Hiestand reported for USA Today;
Fox's ratings for the Yankees' 13-inning win against the Angels Saturday night peaked at 11:30-midnight ET, and held 90% of its audience for a game that lasted until 1:07 a.m. For anybody who thinks MLB is impractical by staging late games: That game's ratings among males aged 18-49 — the demographic craved in TV sports — peaked after 1 a.m.
Billy Witz reported for the New York Times that the late finish of Game 2 of the ALCS did little to diminish the east coast audience, in fact the NYC numbers dwarfed the LA numbers.
For most of the night, the ratings in New York nearly doubled those in Los Angeles — even as the game crept toward Sunday morning on the East Coast. From 11 p.m. to midnight, 22.1 percent of households in New York were watching the game, while in Los Angeles 12.5 percent were tuned in.
As the theater continued, with the Angels taking the lead and Alex Rodriguez homering to get the Yankees even, and the rain falling more steadily, the crowd at Yankee Stadium — at least in the box seats — thinned.
But there were few at home who drifted off to sleep. From midnight to 1 a.m., 44 percent of televisions that were on in New York were tuned in to Game 2. That number was 28 percent in Los Angeles.
MLB is not blind or unresponsive to the complaints about late start and finish times of postseason baseball. MLB and their TV partners did schedule earlier start times for the 2009 postseason. Commissioner Selig has mused publicly about the possibility of scheduling an afternoon World Series game. In the short term that would require the consent of FOX, who would be opposed because afternoon games garner smaller audiences. However if the will exists, MLB could re-negotiate their deal with FOX (expiring in 2013) to accommodate the change in scheduling. But this week when you hear the media complaining that we are all asleep before the game ends, well, apparently we aren’t.
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Pete Toms is an author for the Business of Sports Network, most notably, The Biz of Baseball. He looks forward to your comments and can be contacted through The Biz of Baseball.
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